Examining the Limited Objections to Lehman's Shotgun Wedding

Lehman Brothers, Inc.'s sale to Barclays is a foregone certainty, but--as Judge Easterbrook reminds us here--the "devil is in the details" (origins of phrase here). Scores of objections (like this one filed by Goldman Sachs) were filed by parties objecting to the posted cure amounts of contracts and unexpired leases to be assumed and assigned at closing. Making such an objection was critical to those who disputed or were unsure of the cure amounts since the sale notice advises that failure of any contracting party to object to the assumption and assignment or to the posted cure amounts will be barred from later objecting to the assumption and assignment or to the cure amounts. Other contracting parties (like the Chicago Board of Options Exchange) additionally objected on the basis that generic references to contracts to be assumed didn't adequately specify the contracts subject to assumption, assignment, and cure. Otherwise, however, none of these parties had any conceptual objections to the proposed sale.

Other more interesting insights into the case are found in objections filed by parties concerned that non-debtor assets of various subsidiaries of the Debtor are included or implicated in the sale. One significant focus (as here and here) was Section 2.1 of the Asset Purchase Agreement, which broadly defined the "Purchased Assets" to include "all of the assets of [the Debtor] and its subsidiaries used in connection with the business. Several subsidiary creditors filed objections to the sale of assets that were in nondebtor subsidiaries and thus not "property of the debtor" that could be sold free and clear.

Mickey Mouse's objection, filed by Marty Bienenstock, is the most elegant and comprehensive of all from a bankruptcy perspective. It raises the same concerns about selling nondebtor assets, and adds a range of related intercompany issues, most significant of which is the concern that entry of the sale order will extinguish the rights in third parties to recover assets of nondebtor subsidiaries that shouldn't have been included in the sale. The relief requested thus "would be an illegal, sub rosa substantive consolidation," Mickey complains.

Finally, there's this lengthy and well-documented objection from the Joint Administrators of the Lehman European Group Administration Companies, who were appointed on the day of the bankruptcy filing by the English High Court of Justice pursuant to the English Insolvency Act of 1986. The Joint Administrators have hired a team of 200 PWC accountants and consultants, supported by a team of 100 lawyers, to manage these European related entities. The Joint Administrators say they support the sale, but have concerns about its impact on shared IT and administrative systems, books and records, confidentiality requirements. And then, of course, there is that matter of the Debtor's having swept $8 billion in funds last weekend from Lehman Europe and not returning the funds as the Debtor typically did every Monday morning, but couldn't this past Monday because of the intervening bankruptcy filing. Respectfully, the Joint Administrators ask, that money (and possibly more) should be returned to its rightful owner.

Why the hurry to break the company up and sell it off? It seems like they can't let the ink dry on the VP before they have to get this thing done. Slow down a little. I didn't see any liquidation problems. And, if I am not mistaken, the sun is rising today. There will be time to rip snort through this sale later.

I thought the reason they were expediting this deal was so that Barclays could latch on to the employees before they jumped ship and found a new employer. With the recent turn of events, I'm not sure how many employers Lehman brothers workers could go to, which would support the commenters point of waiting a little bit and getting the liquidation done right.